Google has won a crucial victory in a five-year-long legal battle with Louis Vuitton, which means the internet search engine is not liable when people use the luxury goods maker's trademarks, such as Dior and Moet & Chandon, in online advertising campaigns.

But the judgment also reverses the earlier opinion of one of the court's own advisers, meaning that advertisers may still find themselves being sued by the owner of the trademark they are using in their campaign.

It could force Google to reverse its controversial decision to allow any advertiser to bid for trademarks in its AdWords system, which creates the sponsored links that appear above and alongside the blue search results on its website.

Google allows rival firms to bid for each other's trademarks. So if a web searcher looks for "Barclays", the sponsored links could include adverts from Lloyds TSB or Nationwide as they would also be allowed to bid to have their adverts triggered by the word "Barclays". Google claims that this leads to better search results for users, but when it opened up trademarks to all bidders in the UK and Ireland two years ago it invoked a storm of protest. While it has made similar moves in dozens of other countries it has held back from opening up AdWords in any other European jurisdictions.

Louis Vuitton was furious that Google's search engine was being used by sellers of counterfeit or fake designer goods to advertise their wares and went after the highly profitable search engine itself. Google stressed during the case, however, that it has strict policies that forbid the advertising of counterfeit goods.

The European Court of Justice (ECJ) has made it plain that Google should not be held liable for trademark misuse, adding that its AdWords system is an "information society service" under the terms of EU law. Crucially, this means Google does not have to monitor everything that goes on in AdWords, it must merely react swiftly when a trademark owner notifies it of any infringement.

But the ECJ added that advertisers who do not make it plain that they do not have any commercial link with the brand owner can still be sued by the trademark's rightful owner.

The decision of the European Court of Justice may force Google to stop selling trademarks this side of the Channel unless advertisers can reach their own industry agreement about their use online. A Google spokesman said it was reviewing the situation and recommended that advertisers who are already using trademarks in their advertising campaigns should take legal advice.

"Google have dodged the bullet on this one," said Michael Gardner, partner at Wedlake Bell. "AdWords is a key money earner for them so this is a big legal victory for them. But advertisers who do use other people's brand names as part of their search engine strategy are still potentially in the firing line."

He added that the situation could worsen as the ECJ is currently hearing a case by Interflora against Marks & Spencer, which could extend the scope for advertisers to be sued where the trademarks concerned are well known or have a reputation.

"For the time being, if an advertiser wants to use other people's trademarks as Adwords they will have to make clear that there is no link between themselves and the brand owner whose trademark is used in the AdWord service. If the advertiser gets it wrong they may open themselves to an expensive legal claim," he added. "Google, however, will be able to sit on the sidelines as a spectator and keep the money rolling in."

"We believe that user interest is best served by maximising the choice of keywords, ensuring relevant and informative advertising for a wide variety of different contexts. For instance, if a user is searching for information about a particular car, he or she will want more than just that car's website. They might be looking for different dealers that sell that car, secondhand cars, reviews about the car or looking for information about other cars in the same category."

"Some companies want to limit choice for users by extending trademark law to encompass the use of keywords in online advertising. Ultimately, they want to be able to exercise greater control over the information available to users by preventing other companies from advertising when a user enters their trademark as a search query. In other words, controlling and restricting the amount of information that users may see in response to their searches."

"Our guiding principle has always been that advertising should benefit users, and our aim is to ensure that ads are relevant and useful. We will study the decision as we move forward in order to make sure that we continue to deliver advertising that is perceived as both valuable and relevant by our users."

The case went to the ECJ after Google was found guilty of infringing Louis Vuitton's trademarks by a Paris court in February 2005. After losing an appeal the following year, Google took the case to the European court.

The ECJ also rolled two further French appeals into its judgement, one involved Viaticum, a travel agent which owns the French trademarks Bourse des Vols, Bourse des Voyages and BDV, and a dating service called CNRRH, which owns the Eurochallenges trademark.